Islington v UCKAC & Anor [2006] EWCA Civ 340

Case No B2/2005/1531[2006] EWCA Civ 340
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MAYOR'S AND CITY OF LONDON COUNTY COURT
HH JUDGE SIMPSON
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Thursday, 30 th March 2006
Before
LORD JUSTICE MUMMERYLORD JUSTICE DYSONSIR CHARLES MANTELL
Between
LONDON BOROUGH OF ISLINGTONAppellant/ ClaimantUCKAC & ANRRespondent/ Defendant
(Transcript of the Handed Down Judgment ofSmith Bernal WordWave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7421 4040 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Andrew Arden QC & Terry Gallivan (instructed by Director of Law and Public Services) for AppellantJonathan Seitler QC & Nicholas Nicol (instructed by Messrs Lewis Nedas & Co) for Respondent
Judgment

Introduction

[1]These proceedings relate to 9 Selkirk House, Bemerton Estate, London N1 OAB (“the property”). The first and second defendants are wife and husband. The London Borough of Islington (“the council”) seeks rescission of the secure tenancy granted by it to the second defendant and assigned by him to the first defendant on the grounds of fraudulent misrepresentation and an order for possession consequent upon the rescission, alternatively an order for possession under ground 5 of schedule 2 to the Housing Act 1985 (“the 1985 Act”). By her defence, the first defendant denies that the council was induced into granting the tenancy by any false statement made by her or that, if she made such a statement, she did so knowingly or recklessly.[2]His Honour Judge Simpson decided to deal with the question whether the council was entitled to possession under ground 5 or rescission for fraudulent misrepresentation as preliminary issues. For this purpose, he assumed that all the material facts pleaded by the council were true. By a judgment given on 11 July 2005, the judge decided that the council was not entitled to succeed either under ground 5 or in its claim for rescission of the tenancy. He ordered that the claim be dismissed and that the council pay the second defendant’s costs to be assessed if not agreed. He gave permission to appeal to this court on the grounds that there was no binding authority under the 1985 Act which determined the points at issue. The appeal raises issues as to whether(a) ground 5 is available where the secure tenancy has been the subject of a valid assignment and(b) rescission is available where a landlord has been induced to grant a secure tenancy by a fraudulent misrepresentation made by or on behalf of the tenant.

The assumed facts

[3]On or about 20 June 2000, the first and second defendants applied to the council as homeless persons under Part VII of the Housing Act 1996 (“the 1996 Act”). In their application, they represented that the address at which they were both living on the date of the application was 122 Girdlestone Walk, London N19, that the first defendant had lived at that address since October 1997 and the second defendant since June 1996. They further represented that their reason for leaving that address was that the premises were overcrowded and they had been given 7 days’ notice to leave. They also stated in the application form that the information given to the council in connection with the application was correct to the best of their knowledge and that, in making the application, they had not withheld any information which had any bearing on the application. At paragraph 3 of the Particulars of Claim, it is alleged that these representations “were made fraudulently in that they were false and at all material times the defendants knew them to be false or were reckless as to whether they were true or false”. The pleaded particulars of these allegations are that between January and October 1999, the first and/or second defendants were living at 29 Knights Road, Braintree, Essex; between October 1999 and April 2000, the first and or second defendants were living at 32a Manor Street, Braintree; and that on 20 June 2000, the first and or second defendants were not living at 122 Girdlestone Walk. As I have said, however, the judge proceeded on the basis of assumed facts.[4]On 14 August 2000, the council accepted that the defendants were homeless, eligible for assistance, in priority need, not intentionally homeless and that there was no suitable accommodation available for their occupation. They, therefore, accepted that they were under a duty to make accommodation available to them pursuant to Part VII of the 1996 Act. Pursuant to this duty, on 2 October 2000 the council granted the second defendant a tenancy of a 2 bedroom flat at the property. By an assignment in writing dated 12 November 2001, the second defendant assigned his tenancy of the property to the first defendant. It is accepted by the council that, subject to its arguments in relation to rescission and ground 5, the assignment was valid and permitted by sections 87, 91(1) and (3)(c) of the 1985 Act.[5]So far as material, the 1985 Act provides:
“82. Security of tenure (1) A secure tenancy which is.. (a) a weekly or other periodic tenancy, cannot be brought to an end by the landlord except by obtaining an order mentioned in subsection (1A) (1A) These are the orders— (a) an order of the court for possession of the dwelling-house. (2) Where the landlord obtains an order for the possession of the dwelling-house, the tenancy ends on the date on which the tenant is to give up possession in pursuance of the order. 84. Grounds and orders for possession (1) The court shall not make an order for the possession of a dwelling-house let under a secure tenancy except on one or more of the grounds set out in Schedule 2. (2) The court shall not make an order for possession (a) on the grounds set out in Part 1 of that Schedule (grounds 1 to 8), unless it considers it reasonable to make the order…. Schedule 2 Ground 5 The tenant is the person, or one of the persons, to whom the tenancy was granted and the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by (a) tenant, or (a) a weekly or other periodic tenancy, cannot be brought to an end by the landlord except by obtaining an order mentioned in subsection (1A) (1A) These are the orders— (a) an order of the court for possession of the dwelling-house. (2) Where the landlord obtains an order for the possession of the dwelling-house, the tenancy ends on the date on which the tenant is to give up possession in pursuance of the order. (a) on the grounds set out in Part 1 of that Schedule (grounds 1 to 8), unless it considers it reasonable to make the order….

(b) a person acting at the tenant’s instigation”

The Ground 5 argument

[6]The judge held that ground 5 could not avail the council on the facts of this case. He said that this ground is only available where the defendant from whom possession is sought is the person to whom the tenancy was granted. He also considered that the absence of any reference to predecessors in title in ground 5 is significant. It is to be contrasted with grounds 6,7,8 and 12 which do refer to predecessors in title. Section 621 of the 1985 Act defines “tenancy” as including “a sub-lease or sub-tenancy” and section 621(3) provides that the expression “tenant” shall “be construed accordingly”. The judge concluded that, if Parliament had intended that a defendant should be liable for the acts of a predecessor in title, it would have expressly so provided. In summary, he held that ground 5 should be construed “strictly” (para 21).[7]The council’s case in relation to ground 5 has been argued succinctly by Mr Gallivan. He submits that the judge was wrong to adopt a literal interpretation, since this can produce results which are so unreasonable that they cannot have been intended by Parliament. On the judge’s interpretation, no matter how blatant the fraud by the original tenant may be, or whether the assignee was a party to the fraud (as, on the assumed facts, the first defendant was in the present case), the landlord cannot recover possession under ground 5 once the tenancy has been assigned.[8]Mr Gallivan submits that there are three possible ways to avoid such a result. First, the expression “the tenant” should be read as including predecessors in title. The definition of “tenant” in section 621 is non-exhaustive. If a predecessor in title is not included, it is difficult to see who else is. Secondly, the relevant date for the purposes of identifying “the tenant” in ground 5 should be taken to be the date of the grant of the tenancy, not the date of the hearing. Thirdly, Mr Gallivan submits that the assignee takes subject to any subsisting order or ground for possession: the assignee steps into the shoes of the assignor and cannot be in any better position than the assignor.[9]I cannot accept these submissions essentially for the reasons advanced by Mr Nicol on behalf of the first defendant. The language of ground 5 is clear and unambiguous. The phrase “the tenant is…” is expressed in the present tense and can only refer to the current tenant, i.e. the person from whom possession is sought. If “the tenant” included any predecessor in title, the opening words of ground 5 would serve no purpose. If Parliament had intended to include misrepresentations by predecessors in title, the first 17 words would have been omitted. It would simply have provided:
“the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by (a) the tenant or a predecessor in title or (b) a person acting at the instigation of the tenant or his predecessor in title”
. The 17 words were included because it was intended to limit this ground of possession to cases where the misrepresentation was made by the current tenant or at his instigation: they are not mere surplusage. In my judgment, the plain language of ground 5 makes it impossible to read “the tenant” as including predecessors in title. This conclusion is fortified by the express reference to predecessors in title in grounds 6,7, 8 and 12.[10]For the same reasons, it is impossible to read ground 5 as referring to the person who was the tenant at the date of the grant of the tenancy and not at the date of the hearing. The use of the present tense is fatal to Mr Gallivan’s argument. The grounds are carefully drafted to distinguish between the past and the present. Thus, for example, ground 6 is that “the tenancy was assigned to the tenant, or to a predecessor in title….and a premium was paid…” (emphasis added). Ground 8 is a similar example. Ground 5 involves a past and a present element. The conditions for possession are that the landlord was induced to grant the tenancy by a false statement made the person who is the tenant at the time of the hearing.[11]As for Mr Gallivan’s third point, it is not in issue that an assignee takes the assigned tenancy subject to any subsisting possession order of the court. But I cannot accept that an assignee would take subject to a ground for possession. No authority was cited in support of this proposition, which in any event is wholly inconsistent with the plain words of ground 5.[12]It may seem surprising that ground 5 does not avail a landlord who is induced to grant a tenancy by a fraudulent misrepresentation where there has been an assignment to a person who was party to the fraud. But as Mr Nicol points out, if Mr Gallivan’s argument is correct, an innocent assignee who was not party to the fraud of the original tenant will not be able to avoid ground 5, although I accept that in such a case the court may not be satisfied that it is reasonable to make a possession order as it is required to be by section 84(2)(a). In my view, it is clear that, as regards ground 5, Parliament decided to draw the line at assignees. This is not an unreasonable policy to adopt. Moreover, the categories of persons to whom an assignment of a secure tenancy may be made are few in number: see sections 87, 91(1) and (3)(c) of the 1985 Act. Furthermore, the problem raised by the present case (on the assumed facts) can usually be avoided where applications for assistance are made by more than one person if the landlord insists on granting the secure tenancy to all the applicants.

Rescission

[13]The judge summarised his reasons for concluding that rescission was not available for fraudulent misrepresentation in these terms:
“8. In my judgment, by enacting these provisions and, in particular, by stating that the tenancy cannot be brought to an end by the landlord except by obtaining an order under the Act, Parliament has excluded the availability of rescission as a remedy. If it was not so, there would be no need to have ground 5 at all, because landlords would never use it. They would always choose rescission, which does not carry with it the additional element of reasonableness, although, as an equitable remedy, it might be granted on terms. 9. Furthermore, if the contract is rescinded, there is no longer a secure tenancy, which would be brought to an end so that ground 5 would never apply. If it could be circumvented in this way, there would have been no point in including it in the Schedule.”
[14]Mr Arden submits that the judge erred in law in failing to hold that, if ground 5 does not apply to the facts of the case, the common law continues to do so. Section 84(1) does not oust the common law right to seek rescission for fraudulent misrepresentation. He contends that section 84(1) says nothing about the circumstances in which a landlord may bring a tenancy to an end: it merely prescribes the grounds on which the landlord may obtain an order for possession where the property is let on a secure tenancy. In other words, it does not preclude the landlord from bringing a secure tenancy to an end by obtaining an order of rescission. It is common ground that, once rescinded, a contract is void ab initio. Once the tenancy has been rescinded, the dwelling-house is no longer let under a secure tenancy and section 84(1) does not apply: the court is then able to make an order for possession against the occupant on the footing that he or she is a trespasser.[15]Mr Arden also submits that, if (as I have held) ground 5 is not available where there has been an assignment, there is nothing in the language of ground 5 itself that excludes the right to seek an order of rescission and possession on the grounds of fraudulent misrepresentation where possession is sought from an assignee.[16]In support of his submissions, he relies on Killick v Roberts [1991] 1WLR 1146 and Nutt v Read (1999) 32 HLR 716. Killick was a case under the Rent Act 1977. The landlord claimed that the tenancy had expired by effluxion of time. The tenant alleged that the tenancy was a protected tenancy and that, since no written notice had been served on him pursuant to Case 13, he was a statutory tenant entitled to the protection of the Rent Act 1977. The recorder held that, although the landlord was not entitled to rely on Case 13, she was entitled to rescind the tenancy agreement by reason of the tenant’s misrepresentation. The tenant’s appeal to this court was dismissed. It was held that, where a protected tenancy was rescinded while it was still subsisting, the tenant did not become a statutory tenant, because there was no longer any contractual tenancy from which it could spring.[17]In my judgment, Killick affords no assistance to Mr Arden’s argument. Section 2 of the Rent Act 1977 provides that, after the termination of a protected tenancy of a dwelling-house, a statutory tenancy arises. The circumstances in which the court may make an order for possession are specified in section 98. The Rent Act does not identify the method by which or the circumstances in which the landlord may terminate the protected tenancy. It follows that a protected tenancy may be terminated by any of the methods available at common law for terminating a tenancy, at which point a statutory tenancy would normally arise. By contrast, section 82 of the 1985 Act does specify the only way by which a landlord may bring a secure tenancy to an end. Further, there is no equivalent of ground 5 of the schedule 2 to the 1985 Act in schedule 15 to the Rent Act 1977 (which lists the grounds for obtaining possession of a statutory tenancy).[18]Mr Arden relies on Nutt for the proposition that, where a ground for possession under the 1985 Act does not apply on the facts of a particular case, then the common law continues to do so. In Nutt, the parties had entered into two separate agreements, one for the purchase of a chalet and the other for the right to station the chalet on the pitch of a caravan park where it was already stationed. The agreements were based on the parties’ common mistake that the chalet was distinct from the land and could be sold separately. This court upheld the judge’s decision that the first agreement was void for common mistake and that the second should be set aside or rescinded in equity. The fact that the second agreement gave rise to an assured tenancy was not a reason to refuse equitable rescission. It is true that Nutt involved an assured tenancy under the Housing Act 1988 rather than a secure tenancy under the 1985 Act. But nothing turns on that, since material provisions are the same: see sections 5 and 7 and ground 17 of Part II of schedule 2 of the 1988 Act.[19]Chadwick LJ (with whom Thorpe and Morritt LJJ agreed) said (p 769) that the judge might have taken the view that the second agreement was void for the same reasons as the first, but he did not and there was no appeal on that point. The court held, however, that the judge was right to set aside the second agreement in equity. As is said in the first respondent’s skeleton argument, it is difficult to see why, if the first agreement was void at common law for mistake, the second agreement was not void for the same reason. If it was void at common law, there was no need for the court to have recourse to the equitable jurisdiction derived from Solle v Butcher [1950] 1 KB 671. If it was void, there never was a second agreement and, therefore, there was no agreement for the landlord to bring to an end: the restrictions imposed by section 5 of the 1988 Act (which correspond with those imposed by section 82(1) of the 1985 Act) would have no application.[20]I accept that this court decided that the second agreement should be rescinded on the grounds that it had been entered into on the basis of a fundamental mistake. It is not clear from the judgment of Chadwick LJ what arguments, if any, were advanced against the grant of an order for rescission of the second agreement if (as was held to be the case) the two agreements were interlinked. In my judgment, the decision in Nutt should not be followed in the present case for three reasons. First, it was a decision on different statutory provisions and it is therefore not binding on us in this case. I accept that this is a somewhat technical reason, since there is no material difference between the two sets of provisions, but, strictly speaking, the decision is at most of persuasive effect. Secondly, it would seem that it was not argued that rescission was precluded by section 5 of the 1988 Act, whereas, for reasons that I shall explain shortly, I consider that section 82(1) does preclude rescission of a secure tenancy agreement. Thirdly, the decision is based on Solle v Butcher which was disapproved by this court in Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407, [2003] QB 679. At para 148, Lord Phillips of Worth Matravers MR said of Nutt’s case:
“Toulson J drew attention to Chadwick LJ’s remark that the proceedings had been beset by muddle and confusion and observed that it was perhaps not surprising that the case had not been reported. It is, none the less, a further example of a decision of this court which proceeded on the basis that Solle vButcher was good law.”
[21]At para 157, Lord Phillips concluded that “it is impossible to reconcile Solle v Butcher with Bell v Lever Brothers Ltd…..If coherence is to be restored to this area of our law, it can only be done by declaring that there is no jurisdiction to grant rescission of a contract on the ground of common mistake where that contract is valid and enforceable on ordinary principles of contract law.”[22]Mr Arden also relies on Kay v Lambeth Borough Council [2004] EWCA Civ 926, [2005] QB 352. One of the issues in that case was “whether a secure tenancy can cease to be a tenancy other than by termination within Part IV of the Act”: see para 52 of the judgment of this court given by Auld LJ. The occupiers’ secure tenancies were brought to an end by Lambeth (the head lessor) serving notice on London and Quadrant Housing Trust (the intermediate landlord) terminating the Trust’s lease. It was held at para 67 that as soon as the Trust’s lease ceased to exist, so also did the secure sub-tenancy.[23]Mr Arden rightly accepts that this decision does not bear directly on whether section 82 precludes a landlord from bringing a secure tenancy to an end otherwise than by obtaining an order under section 84. As I understand it, he relies on it for the limited purpose of showing that a secure tenancy may cease to exist otherwise than pursuant to Part IV of the 1985 Act.[24]In my judgment, Kay’s case is of no assistance to Mr Arden’s argument. The question is not whether a secure tenancy may be terminated otherwise than in accordance with sections 82 and 84. Kay’s case shows that it can be so terminated by reason of an act of the superior landlord. The question is whether a secure tenancy can be terminated by the landlord otherwise than in accordance with sections 82 and 84. Indeed, as Mr Jonathan Seitler QC points out, this court accepted the construction of sections 79 to 82 of the 1985 Act advanced by Mr Arden on behalf of the superior and intermediate landlords that these provisions “apply only so far as they go to the immediate landlord of the tenant in question”: see paras 65 and 67 of the judgment.[25]In my judgment, Mr Arden’s submissions must be rejected largely for the reasons given by Mr Seitler. It is important to keep in mind the fundamental difference between a contract which is void and one which is voidable. A void contract is strictly a contradiction in terms, because if an agreement is truly void, it is not a contract; but the term is a useful one and well understood by lawyers: see para 1-070 of Chitty on Contracts (29th edition). A contract which is void is no contract at all. Since it never exists, it is not something which, to use the language of section 82(1) of the 1985 Act, can be “brought to an end”.[26]A contract may be voidable inter alia for misrepresentation. A contract which is voidable exists until and unless it is set aside by an order of rescission made by the court at the instance of a party seeking to terminate it or bring it to an end. A representee who has been induced by misrepresentation, whether fraudulent, negligent or innocent, to enter into a contract with the representor has, on discovery of the true facts, a right of election: he may affirm or disaffirm the contract: Halsbury’s Laws Vol 31 para 784. If the representee affirms the contract, then he loses his right to rescind and the contract continues to have full force and effect. If he disaffirms and seeks to bring the contract to an end, the court may make an order of rescission, but in some circumstances will refuse to do so. If the contract is rescinded, then the contract is avoided ab initio: it is treated as if it never had effect. But that is not to say that, until it is rescinded, it does not have effect. None of this is controversial law. But it needs to be emphasised, because it is important to have in mind the fundamental difference between contracts which are void and those which are voidable.[27]The structure of section 82 and 84 of the 1985 Act is clear. Section 82 provides what the landlord can do in order to obtain possession of a dwelling-house which is let under a secure tenancy. He can only bring such a tenancy to an end by obtaining an order for possession. This means that he cannot bring it to an end in any other way, for example, by obtaining an order for rescission. The only answer to this given by Mr Arden is that an order for rescission does not bring a secure tenancy to an end because such an order extinguishes the tenancy ab initio. In other words, once an order for rescission is made, it is as if the tenancy never existed. But the fact that an order for rescission operates retrospectively does not mean that until the order is made the contract does not exist. Still less does it mean that the order rescinding the contract does not bring the contract to an end. Until and unless a voidable contract is brought to an end, it continues to have full effect. It is a non sequitur to reason that because the effect of an order rescinding a contract is to avoid it ab initio, the order does not bring the contract to an end.[28]The court will not lightly conclude that Parliament has ousted common law and equitable rights, but such rights may be excluded expressly or by necessary implication. Coke, Institute of the Laws of England (1817), cap 20, p 200 (Co. 2 Inst. 200) includes this statement:
“It is a maxim in the common law, that a statute made in the affirmative, without any negative expressed or implied, does not take away the common law…..”
[29]In my judgment, the express wording of section 82, when read with section 84, is a negative enactment in Coke’s sense. It clearly shows that Parliament intended to take away from landlords the right to bring secure tenancies to an end by rescission, whether for misrepresentation or on any other ground. Schedule 2 provides a detailed and exhaustive code of the grounds on which a landlord may bring a secure tenancy to an end and obtain an order for possession. It is to be assumed that Parliament decided on policy grounds that a landlord should be able to bring a secure tenancy to an end and obtain an order for possession where it has been induced to grant a tenancy by a fraudulent misrepresentation, but not where it has been so induced by an innocent or negligent misrepresentation.[30]That the code is exhaustive is clear from the express language of section 82. I would add that it would have been most surprising if, having included fraudulent misrepresentation as a ground for possession, Parliament had intended that a landlord could claim possession for fraudulent misrepresentation by a different route based on a different set of rules. I can think of no reason why Parliament would have intended to allow this. As Mr Seitler submits, the law relating to rescission is complex and difficult. Parliament could not have intended to provide the simple rules set out in sections 82 and 84 and ground 5 and yet allow a landlord to seek possession consequent upon an order for rescission. Moreover, as the judge pointed out, if the landlord can seek rescission, he can circumvent the important safeguard provided by section 84(2)(a) that the court may not make an order for possession unless it considers it reasonable to make the order.[31]Nevertheless, on the assumed facts of the present case, the 1985 Act contains a lacuna. If a landlord is induced to grant a secure tenancy to A in reliance on a fraudulent misrepresentation by A and B, and a valid assignment of the tenancy is made in good faith by A to B, the landlord will not be able to bring the tenancy to an end or obtain possession. This is obviously an undesirable state of affairs. But it is not for the court to plug this gap by rewriting the statute. This is a matter for Parliament.

Postscript on rescission

[32]Since the secure tenancy granted in the present case was a periodic tenancy, the argument was naturally directed to the question whether a landlord can rescind such a tenancy at common law. Several days after the hearing of the appeal, Mr Arden sent further written submissions to the court raising a new point. He draws attention to the fact that section 82(1)(b) refers to “a tenancy for a term certain but subject to termination by the landlord” and provides that such a tenancy too “cannot be brought to an end by the landlord except by obtaining an order mentioned in subsection (1A)”. Subsection (1A)(b) refers to “an order under subsection (3)”. Section 82(3) and (4) provide:
“(3) Where a secure tenancy is a tenancy for a term certain but with a provision for re-entry for forfeiture, the court shall not order possession of the dwelling-house in pursuance of that provision, but in a case where the court would have made such an order it shall instead make an order terminating the tenancy on a date specified in the order and section 86 (periodic tenancy arising on termination of fixed term) shall apply. (4) Section 146 of the Law of Property Act 1925 (restriction on the relief against forfeiture), except subsection (4) (vesting in under-lessee), and any other enactment or rule of law relating to forfeiture, shall apply in relation to proceedings for an order under subsection (3) of this section as if they were proceedings to enforce a right of re-entry or forfeiture.”
[33]The effect of section 82(3) and (4) is that, if there is a provision for re-entry or forfeiture in a fixed-term secure tenancy, the court may not order possession pursuant to it, but instead (and subject to relief from forfeiture) may make an order for termination on a date specified in the order.[34]Mr Arden submits that fixed-term tenancies do not contain provision for re-entry or forfeiture for misrepresentation. Accordingly, unless the right to obtain rescission is available, it is not possible to secure the eviction of a tenant who has acquired a fixed-term tenancy by misrepresentation before the expiry of the term. After the expiry of the term, a periodic tenancy comes into being (section 86): termination of that tenancy is by the same means and on the same grounds as any other periodic secure tenancy.[35]Mr Arden submits that section 82(3) and (4) provide strong support for the argument that sections 82 and 84 were not intended to exclude rescission. I do not agree. First, there is no reason why a fixed-term tenancy should not contain a provision for re-entry or forfeiture for misrepresentation. Secondly, even if the 1985 Act does not permit a landlord, before the expiry of a fixed-term secure tenancy, to obtain possession on the grounds that the tenancy was induced by a tenant’s fraudulent misrepresentation, this is an insufficient reason for failing to give effect to the plain meaning of section 82(3) and (4). For the reasons already given, the statutory scheme clearly excludes the common law right of rescission.

The amendment point

[36]The council seeks permission to re-amend the Particulars of Claim to plead in the alternative that the grant of the tenancy to the second defendant was null and void because the purported grant depended on the decision to accept “a full duty” to make accommodation available to the defendants pursuant to Part VII of the 1996 Act, which decision was void because it was induced by fraud and/or because it was based on a fundamental mistake of fact. Other reasons are pleaded in support of the case that the grant of the tenancy was null and void.[37]Mr Seitler accepts that the new point that the council wishes to raise is arguable. Nevertheless, he objects to the proposed amendment on the grounds that it is substantively too early and procedurally too late. He submits that it is too early because a letter from the council to the defendants dated 2 March 2006 suggests that it has not yet decided whether to treat the grant of the tenancy as void. But the letter states that the council “is entitled to reach a fresh decision on your homelessness application in the light of the true position”. The matter is put beyond doubt by the fact that the council has instructed counsel to apply for permission to re-amend the Particulars of Claim.[38]Mr Seitler says that the application is procedurally too late because it was not made in the court below. He submits that the function of this court is to decide appeals and not to entertain applications which could and should have been made in the lower court. He contends that the council should raise this new point in fresh proceedings. He meets the concern expressed by Mr Arden that the council might be met with a defence based on Henderson v Henderson (1843) 3 Hare 100 by undertaking on behalf of the first defendant not to rely on that defence.[39]If the matter had come before us as an appeal from a decision by the judge to strike out the claim or to give the first defendant summary judgment, it would have been an appropriate exercise of this court’s discretion to allow the amendment, although an application to amend had not been made in the court below. To require the council to start fresh proceedings in such circumstances would not further the overriding objective of deciding cases justly in accordance with CPR 1.1. In this case, the judge tried two preliminary issues on assumed facts. I cannot see why justice requires the council to start fresh proceedings in order to raise the new point. That will merely cause additional expense and delay.[40]There was some discussion as to whether the costs consequences will differ according to whether the council is allowed to re-amend the Particulars of Claim or it is required to start fresh proceedings. Clearly, the council must pay the costs of and occasioned by the amendment. But it was suggested that, if the council is required to start fresh proceedings, it will be obliged to pay the first defendant’s costs of these proceedings without deduction; whereas if the new point is raised by an amendment in the current proceedings and the council is successful and secures an order for costs in its favour, it may be able to set off those costs against the costs payable to the first defendant.[41]I find it impossible to say with confidence what order the court would make in relation to costs if the council were required to start fresh proceedings. It might say that the council should not pay the first defendant’s costs until the conclusion of the fresh proceedings. In these circumstances, I do not consider that the issue of costs should determine the outcome of the application for permission to re-amend. For the reasons already given, I would allow the application.

Conclusion

[42]I would, therefore, dismiss the appeal on both issues, but allow the application to re-amend the Particulars of Claim.

Sir Charles Mantell:

[43]I agree.[44]I agree with the judgment of Dyson LJ.[45]On the assumed facts the first defendant was party to the fraudulent representations in the application on 20 June 2000, which induced the council to grant a secure tenancy of the flat to the second defendant. The council cannot, however, rely on ground 5 against the first defendant, because she took an assignment of the tenancy from the second defendant on 12 November 2001. For the reasons stated by Dyson LJ ground 5 cannot be used against an assignee of the tenancy in order to obtain possession and to terminate the secure tenancy granted by the council.[46]As the relevant provisions of the 1985 provide a complete code for the termination of a secure tenancy, the private law remedy of rescission of the tenancy for fraudulent representation is not available to the council as a means of setting the tenancy aside and obtaining an order for possession against the first defendant.[47]It is, of course, a fundamental and reasonable principle of law that a person cannot take advantage of his own fraud and profit from his own wrong. The provisions of the Housing Act 1985 have produced a situation in which it is possible for a person in the assumed position of the first defendant to violate that principle. The fact that she was a party to the fraudulent representation and was not, when she stepped into her husband’s shoes, a bona fide purchaser for value without notice does not prevent her from resisting an application for an order for possession of the flat under the 1985 Act. The unpalatable result is that, as a result of the assignment, she is in a stronger legal position than her husband was and that she is occupying a flat which should be available for the occupation of a homeless person making an honest application to the council for accommodation.[48]It is matter for Parliament to decide whether it wants to do anything to remedy the situation. The 1985 Act prevents the courts from doing anything about it.

Cited in 12 later judgments

and 3 more of the most senior